Over the past 60 years, India has taken rapid strides in the
development of the power sector. The liberalization and globalization
of the economy has led to increased industrial and commercial
activities which have resulted in a high growth in power demand. It is
therefore essential that growth of Power Sector shall match with the
overall economic growth of the nation. However this developmental
process has to be within the realms of sustainable development and
environmental concerns. The supply continues to struggle to keep pace
with demand and this has led to energy and peak deficit in the country.
During the year 2013-14 the country faced energy deficit of 4.2% and
peak deficit of 4.5%. Target generation for the 12th Plan is around
88,000 MW (as per CEA). The planned capacity expansion along with
efficiency improvements will substantially reduce the supply- demand
gap in the future. Private sector is expected to play a much larger
role in future supply additions, as compared to the past. Your company
has identified this opportunity and expeditiously adding capacity to
narrow down the demand supply gap so as to contribute in the economic
growth of the country.

As the Indian power sector is working towards increasing the generation
and transmission capacities, key challenges in the sector needs to be
addressed. Majority of capacity addition planned for the 12th Plan
comprises of coal based projects which are expected to operationalise
provided adequate domestic coal is available for power projects. To
meet shortfall of domestic coal, import of coal is inevitable, but
related issues of increase in cost of generation and thus the increase
in tariff also needs to be addressed. Hence the issue related to
availability of domestic coal needs to be aggressively pursued and
domestic coal production needs to be increased to meet the requirement
of power projects. Your company has taken considerable care to secure
fuel supplies for its projects. As you are aware, your company already
has Letter of Assurance for supply of coal from Coal India Limited
subsidiary companies for full 5400 MW Project that is being developed
at Amravati and Nashik. Your company has signed Fuel Supply Agreement
with SECL for 5.49 MTPA coal for Amravati Thermal Power Project
Phase-1. The power sector cannot deliver on its social commitments
unless it is commercially and financially viable. Of course the
challenges before the power sector are many, but we are confident that
a new stable government formed recently at centre will reduce
uncertainty and increase the decisive policy action to address the
challenges power sector faces today.

On the project development front your company has achieved all the
milestones it had set for the year. Our attention to detail, deadlines,
budgets, quality and safety is what sets us apart from our competitiors

This year is a milestone in the track record of your company in which,
Unit 1 & Unit 2 of Amravati Thermal Power Station (ATPS) achieved
Commercial Operation Date (COD)on 3.6.2013 and 28.3.2014 respectively.
You would be happy to note that ATPS is supplying power to Maharashtra
State Electricity Distribution Company Ltd (MSEDCL), since June 2013.
The remaining Units 3 to 5 are also nearing completion and shall be
commissioned progressively by March, 2015.

The construction of 1350 MW Nashik Phase-I is in full swing. Unit 1 of
Nashik achieved Commercial Operation Date (COD) on 29.3.2014. Unit 2 is
expected to be commissioned in the third quarter of FY 2014-15. The BTG
activities for Units 3 to 5 are also in various stages of completion
and are targeted for commissioning progressively by end of FY 2015-16.

Government of Maharashtra has approved purchase of 950 MW from Nasik
Phase-I by Maharashtra State Electricity Distribution Company Limited
(MSEDCL) and BEST. MERC has approved purchase of 650 MW from Nashik
Phase-I by MSEDCL and Power Purchase Agreement (PPA) for 300 MW with
BEST is expected shortly.

Coal India Limited (CIL) with whom your Company has executed Fuel
Supply Agreement (FSA) for supply of coal is not able to meet its
commitments and is unable to supply the assured quantity of coal. This
is not unique to your Company but a common issue with all the
generators who depend on the linkage domestic coal from CIL.
Considering the inadequacy of domestic coal, Cabinet Committee on
Economic Affairs (CCEA) in its resolution dated 21st June 2013 approved
a mechanism whereby CIL to supply 65%, 65% , 67% and 75% of the Annual
Contracted Quantity (ACQ) during the remaining period of 12th 5-year
plan. CIL may supply the balance coal requirement to the willing power
generators from imported source on cost plus basis. Generators
themselves can also import coal to meet the deficit. Additional cost of
such coal would be considered as pass-through in tariff and concerned
regulatory commissions would be deciding on the same based on the
application of the generators on case to case basis. To accommodate
this, New Coal Distribution Policy (NCDP) 2007 was amended by Ministry
of Coal on 26th July 2013 and on 31st July 2013 Ministry of Power
issued advisory note to all the Electricity Regulatory Commissions in
this regard.

In this background, your Company had filed a petition with Hon''ble
Maharashtra Electricity Regulatory Commission (MERC) to allow use of
coal from imported/ alternate source(s) to meet the deficit and to
allow additional cost of such coal as pass through in tariff by way of
compensation. Considering the hardship, Hon''ble MERC in their latest
order allowed use of coal from imported/alternate source to meet the
shortfall of linkage coal and the additional cost of such coal would be
recovered in the tariff. Hon''ble MERC for the purpose has prescribed a
formula for such compensation which will be over and above the tariff
under Power Purchase Agreement. The indicative compensatory fuel charge
is Rs. 1.55/kWh which will be payable by MSEDCL on the incremental
generation from imported coal. Your Company has now initiated the
process of procuring the imported/alternate coal to mitigate the
shortfall in linkage coal to run units at higher PLF thereby improving
profitability."

Your Company is also considering building generation assets based on
other forms of energy sources including non-conventional and renewable
energy resources as a part of which Company is exploring the
possibilities of setting up power projects based on solar and wind
energy.

In 2013-14 year we achieved major milestones and poised to continue the
good work in future also. Your company is in a better position than
many of its competitors to face the current challenging market
conditions in power sector. We are confident that the Company would
take up leadership position with strong technical, financial and
commercial capabilities. With our projects having firm tie-up for sale
of power, and long term domestic coal linkage we would realize superior
returns to our shareholders.

The discharge of corporate social responsibility has been legally made
mandatory for companies whose networth, turnover or profitability
during a financial year and your company falls within the criteria laid
down under the relevant statute, most notably including the Companies
Act, 2013 and your company falls within the category of such
companies,. However while your company has always had the acute
realization of running the business efficiently and effectively so as
to ensure overall profitability and growth your Company has at the same
time been fully aware that it has a responsibility to discharge towards
the society and therefore even before the discharge of social
responsibility by corporates having been mandated by law, your company
has been committed to help society through meaningful community
development programs in the vicinity of project sites. Your Company has
already spent around a sizeable amount on Education and Training,
Health, Medical Aid and Social development activities in the vicinity
of Amravati and Nashik Thermal Power Project. The people of the
surrounding community have benefited a lot from these programs and this
has created a cordial environment between the company and people.

Lastly I take this opportunity to warmly thank all our Shareholders,
Customers, Employees, Bankers and Financial Institutions for reposing
their faith in us and motivating us to excel in all facets of our
businesses.

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